My finance view

Nobody from Detroit got a particularly warm welcome in Washington last week, but the reception was coolest for General Motors, the largest and most vulnerable automaker.

As GMers admit off the record, Chairman and CEO Richard Wagoner turned in a dismal performance during two days of congressional testimony.

He served up the same kind of boilerplate that GM (GM, Fortune 500) has been offering analysts and journalists for months: We promise to make better cars, more economical cars, more alternative fuel cars.

And he presented a laundry list of steps the company has taken to regain profitability, like reducing manufacturing capacity, suspending dividend payments and eliminating health care coverage for salaried retirees.

But with a straight face, he blamed GM’s problems not on its products, its business plan or its long-term strategy but on "the global financial crisis." He didn’t bother to acknowledge that GM has lost an astonishing $72 billion in the past four years on his watch - including $51 billion before the crisis hit in 2008.

Wagoner also flunked the public relations part by arriving in Washington on board his corporate jet - couldn’t he at least have hitched a ride with Ford (F, Fortune 500) or Chrysler? - and failed to step up when asked to demonstrate a sign of financial sacrifice.

With the company in danger of running out of cash before the inauguration of President-elect Obama, what should Wagoner do now?

Start burning the deck chairs. GM needs to make some visible and effective efforts to cut costs and raise cash. Mounting a bare-bones exhibit at the Los Angeles auto show is a start. But GM has been dangerously slow about identifying surplus assets like Hummer and putting them up for sale.

Show some sacrifice. GM is currently planning to go ahead with its scheduled Christmas shutdown from Dec. 24th until January 5th. That’s great - GM employees will be on paid holiday while the rest of us are working. GM should get them back to their jobs and have them come up with more ways to raise cash.

Develop a plan and sell it hard. Wagoner tried to bluff the government into a bailout without showing any of his cards. That didn’t work, so now he needs to up the ante. When Chrysler was on the ropes in 1979, CEO Lee Iacocca put together a display of new models and took it on the road to demonstrate that Chrysler had a future business cards. Wagoner needs to do the same thing.

He’s working on it. A GM spokesman says, "We intend to deliver a plan to Congress that shows them a viable General Motors."

But what is GM’s future? Certainly not as a manufacturer selling eight - count ‘em eight - brands of cars at a time when Toyota (TM), its closest competitor, gets by with three. GM needs to address that issue immediately, even if it secretly believes that eliminating brands and their dealers is the wrong thing to do.

Some have suggested that GM become, in effect, an arm of the federal government, performing the energy independence work that Obama has promised. But having seen GM fail at profitably making and selling automobiles, something it has been doing for 100 years, I’m frightened about the possibility that it should try its hand at something new.

By now, it is clear to almost everyone that the U.S. doesn’t need three independent car companies any longer. There isn’t enough business for all of them.

What Wagoner should do is design a new structure that will allow the three of them to combine forces. It is clear that Cerberus is anxious to give up its ownership of Chrysler at any price. The hard part will be convincing the Ford family to relinquish its control of Ford Motor.

Here is how Wagoner can do it: Looming in 2020 are stringent new federal fuel economy regulations that will require cars that get 35 miles per gallon. The current mandate is 27.5 mpg.

Meanwhile, California and a dozen other states are licking their lips in anticipation of a waiver from the Environmental Protection Agency that will allow them to demand cars that get 43 miles per gallon.

Having underinvested for years, it is going to be exceedingly difficult for Ford to meet that target. But by sharing technology with GM, it may have a chance.

If he can turn the Detroit Three into the Big One with a new environmental mandate, Wagoner will have developed a compelling rationale for a Congressional bailout.

It is worth a shot. Nothing else has succeeded so far. 

Source

Hong Kong's inflation slowed for a third month as commodity prices fell and the government waived public-housing rents and subsidized electricity bills.

Consumer prices rose 1.8 percent in October from a year earlier, the government said today on its Web site, after gaining 3 percent in September. That compared with the 1.9 percent median estimate of 14 economists surveyed by Bloomberg.

Inflation has eased from July's decade-high level of 6.3 percent because of smaller gains of food prices in China, Hong Kong's major supplier, and lower global energy prices. Hong Kong slipped into its first recession last quarter since the severe acute respiratory syndrome epidemic in 2003.

“Inflation has cooled on the back of lower food and energy prices,'' said Kelvin Lau, an economist at Standard Chartered Bank Plc in Hong Kong. “Looking ahead, inflation will continue on a downward trend along with the economic cycle.''

For the first 10 months, Hong Kong's consumer prices rose 4.6 percent from a year earlier, the government said.

Gross domestic product shrank 0.5 percent in the third quarter from the previous three months, as exports and domestic demand cooled.

In China, the world's fastest-growing major economy, consumer prices climbed 4 percent in October from a year earlier and food prices increased 8 fast cash in one hour.5 percent. Both were the least in 17 months.

Oil's Drop

Crude oil has fallen more than 40 percent this year, prompting utility companies and gas stations to cut prices. CLP Holdings Ltd., Hong Kong's biggest power supplier, lowered the average net electricity tariff by 3 percent on Oct. 1.

The government has subsidized household electricity by taking HK$300 off bills every month for one year starting September. It has also distributed food allowances for the poor and waived rents for public-housing residents for three months starting August.

Food prices rose 9.4 percent in October from a year earlier, the government said. Utility costs slumped 32.3 percent and rents slipped 0.8 percent.

“Looking ahead, with the international commodity prices retreating and U.S. dollar strengthening, inflationary pressures from the external front are receding,'' the government said in the statement. “These factors, coupled with the slowdown in domestic demand and government's relief measures, should be conducive to progressive easing in inflation going forward.''

Source

Weighed down by debt, media giant CanWest Global Communications Corp. isn’t ruling out possible asset sales after buying itself some wiggle room by renegotiating debt covenants and cutting 560 jobs across the company.

Leonard Asper, the chief executive of CanWest, said the conglomerate is "continuing to look at our asset base," but warned that observers shouldn’t assume that oft-cited properties such as the money-losing National Post or Australian TV network TEN would be on the block.

"We have to look at where the biggest bang for the buck is," he said during a conference call to discuss third-quarter earnings.

"There’s been some speculation about whether we should sell this TV channel or that newspaper … but in some places it doesn’t really help us to sell assets because we lose (operating income)."

CanWest yesterday posted a loss of $1 billion, or $5.73 a share, for the three-month period ended Aug. 31.

The loss was attributed in part to a $1.01 billion non-cash writedown on the goodwill and broadcast licences related to the company’s Canadian conventional television business – a move Asper said had been taken by other big media companies.

Revenue, meanwhile, rose to $725.9 million from $678.4 million a year earlier as the company benefited from last year’s acquisition of specialty TV-operator Alliance Atlantis Communications Inc.

CanWest, which also owns the Global television network and big city newspapers across the country, has come under increasing pressure in recent weeks as an economic recession threatens to further sap advertising revenue.

Analysts have expressed concern that the company is in danger of running out of cash to service its $3.7 billion worth of debt obligations creditscore.

"Given the high degree of operating and financial leverage across CanWest’s operations, we believe a deteriorating economy will remain a major headwind for the company," said Drew McReynolds, an analyst at RBC Capital Markets.

The debt load accumulated over the years as the conglomerate built its media empire.

It paid $3.5 billion in 2000 for Hollinger’s newspaper assets and last year partnered with Goldman Sachs in a complicated deal to buy Alliance Atlantis for $2.3 billion, although Goldman shouldered most of the upfront cost.

In a bid to fix its balance sheet, CanWest said this week it is cutting 560 jobs, or about 5 per cent of its global workforce. The company said the move would save $61 million a year.

As well, CanWest took steps earlier this month to improve the performance of the National Post, its flagship newspaper, by focusing more on profitable markets and cutting back on deeply discounted circulation.

The company has also renegotiated its debt covenants, allowing it a higher ratio of debt versus operating earnings through next year, according to John Maguire, CanWest’s chief financial officer.

Asper said certain parts of the business were poised to weather an economic storm better than others.

"Digital and specialty channel revenue is good, strong, and publishing revenue is a little more challenging. Conventional television revenue is the real tough one," he said.

Shares of CanWest dropped seven cents yesterday to close at 73 cents on the Toronto Stock Exchange.

Source

OTTAWA–The International Energy Agency is warning that the oil companies are sowing the seeds of a new supply crisis and a return to sky-high prices.

The agency says oil producers are delaying expensive projects that would bring in much need supply, including some in Canada’s oil sands.

I.E.A chief economist Fatih Birol says he is worried that when demand rebounds, there may be another supply crunch like the one that occurred last summer.

The Paris-based agency, which advises rich countries on energry policies, says in a report released Wednesday it the world’s energy system is on an unsustainable path short-term cash loans.

It warns the result could be both oil shortages and “catastrophic and irreversible" climate damage.

The agency predicts oil demand will climb to 106 million barrels a day from the current 85 million.

It says to meet rising energy demand over the next two decades, the industry would have to invest a minimum of $26 trillion.

Source

Americans began pumping money into mutual funds for the first time in 15 weeks, as global equities started rallying at the end of October, according to a report released Thursday.

Investors poured $2.2 billion into equity-based mutual funds during the seven days ended Nov. 5, compared to an outflow of $9.2 billion the week before, according to TrimTabs Investment Research. The last time stock-based mutual funds saw net gains was during the week ended July 23.

Stocks surged as October drew to a close, leading many investors to put money back into their mutual funds. But the moves may have been premature as markets turned sour earlier this week, said Conrad Gann, president and chief operating officer of TrimTabs.

"Retail investors don’t have the best timing. They basically got burned over the last few days," said Gann.

Over the two days following Tuesday’s presidential election, concern about the state of the economy sent the Dow Jones industrial average down some 929 points, marking its biggest two-day point loss ever.

Downward pressure. Funds that invest primarily in U.S.-based stocks saw an increase of $2.3 billion versus a decline of $7 billion in the prior week. However funds that focus on non-U.S. stocks continued to see declines, with investors pulling out a net $140 million compared to $2.2 billion last week.

"Foreign [funds] have the double whammy of a dollar rebound and the falling market," said Gann Faxless pay advances.

The dollar has gained significantly against most major currencies over the past several weeks as many investors try to hedge their bets against the volatile stock market.

As the dollar increases, the value of foreign funds decreases because the value of the stocks they hold, which are denominated in foreign currencies, goes down, Gann explained.

Bond-based funds saw a net increase of $518 million in investments compared to a decline of $5.9 billion last week, and hybrid funds, which try to strike a balance between stocks and bonds, saw a net influx of $184 million compared to net withdrawals of $2.8 billion.

Meanwhile exchange-traded funds (ETFs), unmanaged bundles of stocks that trade as a single unit on normal exchanges, saw a net inflow of $885 million, down from an inflow of $903 million last week.

Over the past several months, money flowing into ETFs has gotten a boost from the economic weakness, since it allows investors to spread their risk across a whole range of stocks.

Despite the apparent turnaround in mutual fund confidence, "we’ll continue to see outflows," said Gann. The economy is still struggling, especially overseas, he pointed out. 

Source

So you’re driving to work, sipping on steamy coffee when your cellphone rings.

Instinctively, your knees slide into position to take over the wheel as your free hand reaches to answer the call. You are now executing the highly treacherous chat-sip-and-steer move. If this were competitive diving, the degree of difficulty would equal the reverse-one-and-a-half-somersault-with-four-and-a-half twists.

Glance to the right and left in traffic and witness the burgeoning phenomenon: Drivers all around you are attempting the same unlikely telecommunications stunt while doing 100 km/h on the highway.

News reports last week confirmed the Ontario government is about to outlaw such behind-the-wheel multi-tasking with legislation aimed at the growing hordes of mobile communicators who cannot keep their hands on the wheel and their eyes on the road.

Stiff penalties are in store for anyone talking on a cellphone, holding a GPS device or texting while simultaneously negotiating traffic. Considering the obvious public safety risks associated with driving while under the influence of cellphones, it’s little wonder.

Here’s the irony: Legislation designed to limit use of technology in the car can be skirted by adding more technology in the car.

Wireless devices that harness your cell signal and invisibly transfer it into a speakerphone or transmit it into a hands-free earpiece are now legal loopholes for tech-demanding drivers.

Wireless Bluetooth car speakers clip to your car’s visor or, in some cases, plug into the cigarette lighter. I’ve been testing out Sony Ericsson’s HCB-120 car speakerphone ($100), a sturdy and simple box that sits out of the way directly above your head.

Establishing the connection to your phone is simple with any of these hands-free devices. Settings in your phone allow you to "enable" Bluetooth and "pair" the phone with the speaker. Think of it as instant spiritual connection in which your phone and the hands-free device intuitively understand each other and share everything.

Both my Sony Ericsson and BlackBerry phones paired nicely with the HCB-120. A button on the device lets you retrieve and hang up without ever losing visuals on the road. The only complaint here is the volume levels that left me craning forward, head tilted to one side in order to hear my caller in noisy traffic approved cash advance.

The Parrot Minikit Bluetooth Hands-Free Speaker ($99) has a less boxy look, with curved lines and funky design that doubles as a kind of in-car art installation hanging from your visor. Volume levels are much better here and the pickup and hang-up buttons are larger and colour-coded. In all, very slick.

As for in-ear options, the provocatively dubbed Jawbone and Sony Ericsson’s HBH-PV703 are two examples that tuck into your ear canal and deliver sound from your phone and transmit your voice back.

The Jawbone ($139) has a sleek look, jetting out from one ear as it hugs tightly to your face. When the phone rings, just tap on the device as it sits in your ear and you’ve answered the call. Another taps shuts it down. The big pitch here is the "noise assassin" feature designed to kill surrounding noise and purify your voice to your callers. It works. Sound quality here is remarkable.

Sony Ericsson’s device ($39) has a more standard look and price. Sound quality doesn’t match the Jawbone but it’s perfectly acceptable, given the price difference.

The main issue with earpieces is comfort. I don’t mind wearing them. But there are those who see attaching a plastic appendage to the side of their head for lengthy periods of time as a form of sci-fi torture. As well, you’ll need to be vigilant about recharging. The tiny rechargeable batteries die after a few hours of talk time and any prospects of in-car chatting die with them.

The choice between Bluetooth earpiece and speakerphone is a personal call, so to speak.

Whatever your preference, consider that neither option will address the far more fundamental problem: We talk on our cellphones far too much while driving.

Having narrowly avoided a 12-car pile up while jotting off a text message in downtown traffic recently (I’m not proud of it, I’m just saying …), I am (barely) living testament to the fact that we need saving from our tech-obsessed selves.

Robert Cribb occasionally reviews the latest products on the market. Email him at rcribb@thestar.ca

Source

WASHINGTON — Facing a legal battle that would have illuminated its widening market power, Google Inc. turned its back on struggling rival Yahoo Inc. and pulled the plug on an Internet advertising partnership that had been conceived to keep Yahoo out of Microsoft Corp.’s clutches.

The retreat announced Wednesday represented another setback for Yahoo, which had been counting on the Google deal to boost its finances and placate shareholders still incensed by management’s decision to reject a $47.5 billion takeover bid from Microsoft six months ago.

Google backed off to avoid a challenge from the Justice Department, which said it would sue to block the deal to preserve competition in Internet advertising companies making payday loans. Attorneys general from 15 states and Canada’s antitrust regulators also loomed as potential adversaries.

Without Google’s help, Yahoo now might feel more pressure to renew talks with Microsoft and ultimately sell itself for much less than the $33 per share that Microsoft offered in May. Yahoo closed Wednesday at $13.92, gaining more than 4 percent in a move reflecting investor hopes that Microsoft might renew its pursuit.

Source

MONTREAL–Molson Coors Brewing Co. has reported a 28.6 per cent rise in summer-quarter net income to US$173.2 million, boosted by its new MillerCoors joint venture in the United States.

The U.S.-Canadian brewer said Wednesday that underlying earnings edged up to $175.8 million or 95 cents per share in the 13 weeks ended Sept. 28, compared with $173.2 million in last year’s third quarter.

Molson Coors, with corporate offices in Denver and Montreal, said its sales grew 3.7 per cent in Canada while the overall Canadian beer market increased three per cent. In Britain, Molson Coors sales were down 3.1 per cent, beating an overall market slide of seven per cent.

Underlying pretax profit in Canada was down 8.1 per cent from a year earlier at $151 million. The Canadian segment "is performing well; however, competitive price discounting in Quebec, along with continued steep commodity inflation, held back Canada profit performance in the quarter," the company stated online pay day loans.

In the U.S., the first quarter of combined operations of MillerCoors increased underlying profit 28 per cent compared with the separate operations a year ago, to $190.8 million.

The company’s worldwide beer volume was 12.025 million barrels in the quarter, up 7.4 per cent from a year earlier, or 0.2 per cent on an adjusted basis.

"We are pleased to have achieved higher total company volume and income in the third quarter, despite challenging competitive and economic conditions in all our markets," stated Molson Coors CEO Peter Swinburn.

"We gained market share in both Canada and the U.K. during the quarter, and we initiated the integration of two U.S. beer businesses into MillerCoors, a strong and competitive brewer with the talent, brands and scale to win in the U.S."

Source

BMW (BMWG.DE: Quote, Profile, Research, Stock Buzz) abandoned its 2008 earnings forecast and cut production on Tuesday after a 60-percent plunge in quarterly profit that underscored slowing sales in the troubled autos industry.

The woes facing the world’s biggest premium brand automaker followed the worst month in 25 years for the industry in the United States, BMW’s largest market, including big setbacks for U.S. giants General Motors (GM.N: Quote, Profile, Research, Stock Buzz) and Ford (F.N: Quote, Profile, Research, Stock Buzz).

Automakers are doing what they can to cut output and many are gearing up for a price war as they try to reduce excess inventories before year-end.

“Difficult business conditions and the volatile climate on the market mean that it is as good as impossible from today’s perspective to make a reliable prediction of the earnings outcome for 2008,” BMW Chief Executive Norbert Reithofer said.

“We will, however, achieve a result that is clearly positive,” he said. BMW had previous forecast a group pretax margin of at least 4 percent this year.

BMW fell well short of analysts’ expectations for the three months to Sept 30, with earnings before interest and tax (EBIT) down 60 percent to 387 million euros ($498.4 million) versus an average estimate of 574 million from a Reuters poll of 17 analysts cash til payday.

Revenues fell 8.6 percent to 12.59 billion euros and BMW said it would chop production by at least 40,000 cars, adding to an earlier cut of 25,000. The cuts represent 5 percent of 2007 output.

BMW also took 342 million euros in risk provisions for bad loans and bigger-than-expected declines in the value of vehicles coming off lease in the third quarter and said it could not rule out more this year.

OCTOBER CHILL

Overall U.S. auto sales in October fell by 32 percent to their lowest ebb since February 1983.

That included a 45 percent drop for GM and a 30 percent fall at Ford. BMW’s sales fell by 8.5 percent.

On a per capita basis, GM said October was the weakest month for U.S. auto sales since the end of World War Two.

Europe also suffered, with industry wide sales in Spain off 40 percent and down 19 percent in Italy.

Like BMW, Ford said it was eyeing production cuts, noting it could reduce output in coming weeks by cutting overtime and suspending work at some plants.

An aggressive round of discounting also looms this month and next as automakers prepare to clear 2008 model vehicles using cut-rate financing and other incentives. 

Read more

The U.S. dollar rose Thursday as investors responded to higher stock prices and a report that showed the nation’s economy shrank in the third quarter.

The euro fell 0.6% to $1.2973 from $1.2956 late Wednesday in New York.

Britain’s pound traded at $1.6444, up from $1.6375.

Against the yen, the dollar rose more than 1% to ¥98.544 from ¥97.235.

The dollar came under pressure earlier in the session as Asian and European markets rallied. But the greenback recovered as the rally’s momentum faded.

"There was some enthusiasm overnight from fed rate cut," said Vassili Serebriakov, currency strategist at Wells Fargo & Company’s foreign exchange division. "But some of that enthusiasm is wearing off," he added.

Currency traders often buy higher yielding currencies such as the euro and the pound when stock prices are rising and sell those currencies in favor of lower yielding currencies like the dollar when markets are volatile.

World markets were bolstered by the Federal Reserve’s decision Wednesday to lower its benchmark interest rate to 1%. Central banks in Asia also cut interest rates freecreditreport.com.

The Fed also announced plans to establish $30 billion swap facilities with central banks in emerging markets.

In Asia, major markets posted double-digit percentage gains. Japan’s Nikkei index climbed 10% while Hong Kong’s Hang Seng index surged 12.8%. In Seoul, the KOSPI shot up a record 12%.

European shares closed mostly higher. Germany’s DAX and the FTSE-100 in London both added more than 1% while the CAC-40 gained 0.15%.

Major stock indexes in the Untied States opened higher but trimmed gains at midday as investors responded to a government report that showed the nation’s economy shrank in the third quarter.

"The market is taking a step back after the weak GDP figures," said Gareth Sylvester, senior currency analyst at foreign exchange brokerage HiFx.

Gross Domestic Product, the broadest measure of the nation’s economy, fell at an annual rate of 0.3% in the third quarter after growing at a 2.8% rate in the second quarter. 

Source